To Automate or NOT – this is the question?

TO AUTOMATE OR NOT- THIS IS THE QUESTION

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There are a lot more businesses asking this question—"do we automate, or can we survive with a reduced "pool" of potential employees that are available.

Prior to the start of 2020, there were a large number of smaller businesses looking at automation in their primary, secondary, and end-of-line packaging and saying "we just cannot afford the automation you are providing." As we know, a major event happened. We had a worldwide pandemic. This changed how every business had to make changes to survive, and one of these changes is the question of whether to automate or not.

In the years prior to 2020, the focus on "return on investment" (ROI) was generally viewed as how many manhours we could save by installing an automatic palletizer or bagging machine — in most cases, this would never satisfy the accounting department, as the payback was 10 or more years.

Since then, I believe a lot of organisations have broadened their view and now look at other costs and how they are associated with or included in their ROI calculations.

There are hidden costs like recruiting, employment taxes, and if you have a 20 or 30% turnover each quarter, this is a very large cost. I recently read that recruiting costs per person could cost your business a minimum of $2,500 to $3,000 per person, and if you are looking for middle management or more skilled labor, it could be double or triple these numbers. And if you are having high turnover, this could easily add up over the life or ROI period of new equipment.

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Another cost that is never calculated is the drop in performance when new employees are included. A drop of 10 – 20% in performance over several weeks or month can add up, but these numbers are not calculated against an ROI, but they should be, every time you have to replace staff there is a cost. Yes, a new automated line will take some time to get to full performance but if its well kept and you have a strong preventive maintenance plan this drop in performance only happens once over the life of the equipment which can be 15 to 20 years if done correctly, not once or twice a year.

Working in factories for the last 40 years (30 in operations & 10 in design, automation and procurement) I have seen the most disappointing miss in calculating ROI’s and it has been the lack or unwillingness to calculate the personal safety risk of working on a production line, from repetitive injuries, to full on major back injuries, that can significantly have major upfront costs to a business (including fines) and long term costs with increases in insurance plans. From my experiences most company’s have the data available but are not willing to include it in their decision making process’ when considering an ROI on investing in automation for packaging.

So, when you are considering automation, please use all the ROI tools you have, include all the costs listed above and more if your company has them.